The United States and Japan will step up their defence cooperation to deal with the threat from nuclear-armed North Korea as tensions in East Asia remain high, officials from the two allies said on Thursday.

NSW premier denies special deal on schools

More than half-a-billion dollars in funding for NSW schools would have been lost if the state had not signed up to the national education agreement, Premier Barry O'Farrell says.

Mr O'Farrell says the federal government did not do a special deal for NSW to become the first state to agree to the two-for-one schools funding arrangement.

The deal will deliver $3.27 billion in commonwealth funds for NSW schools over six years, starting next year.

Under the agreement, the NSW government must find savings in its own budget to round out the total funding boost to $5 billion.

Mr O'Farrell said on Wednesday it was a difficult decision but his cabinet agreed it was worthwhile to secure the additional resources that would flow to NSW schools.

Cabinet also decided it was worthwhile to engage in further savings and cost-cutting measures to fulfil NSW's side of the deal, he told reporters.

Mr O'Farrell said the prime minister made it clear that if NSW didn't sign up it would lose national partnership funding of about $300 million a year and an estimated $200 million to $250 million in annual growth funding from the federal government.

"If we hadn't signed we were staring at cuts of between $500 million and $600 million a year from the federal government.

"In one sense it was a tough choice but ultimately we backed what we thought was right."

Asked if NSW had cut a special deal for Tuesday's agreement, Mr O'Farrell said: "No, as the prime minister said yesterday, everything we've signed up to is available to every other state".

Ms Gillard had said $14.5 billion was available, with $5 billion for NSW, and the 65-35 funding split was precisely what was being offered to other state, he said.

Mr O'Farrell said the agreement required federal legislation to guarantee the funding and if the federal opposition wanted to overturn the agreement if it won office that legislation would have to be wound back.

The premier said the NSW government supported the goals and the outcomes of the national education agreement.

"Until the election we'll deal with the government of the day. You can't do anything more, or you would be accusing me of playing politics," Mr O'Farrell said.